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SUMMARY:Designing Stress Scenarios
DTSTART;VALUE=DATE-TIME:20210618T150000
DTEND;VALUE=DATE-TIME:20210618T163000
UID:7e2d6ddfea0c8e3d2e4c9776b4ee221bdea6da31bff1011b743f09bc
CATEGORIES:Conferences - Seminars
DESCRIPTION:Cecilia PARLATORE\, NYU\nWe develop a tractable framework to s
tudy the optimal design of stress scenarios. A risk-averse principal (e.g.
\, a manager\, a regulator) seeks to learn about the exposures of a group
of agents (e.g.\, traders\, banks) to a set of risk factors. The principal
asks the agents to report their outcomes (e.g.\, credit losses) under a v
ariety of scenarios that she designs. She can then take remedial actions (
e.g.\, mandate reductions in risk exposures). The principal’s program ha
s two parts. For a given set of scenarios\, we show how to apply a Kalman
filter to solve the learning problem. The optimal design is then a functio
n of what she wants to learn and how she intends to intervene if she uncov
ers excessive exposures. The choice of optimal scenarios depend on the pri
ncipal’s priors about risk exposures\, the cost of ex-post interventions
\, and the potential correlation of exposures across and within agents. We
develop a tractable framework to study the optimal design of stress scena
rios. A risk-averse principal (e.g.\, a manager\, a regulator) seeks to le
arn about the exposures of a group of agents (e.g.\, traders\, banks) to a
set of risk factors. The principal asks the agents to report their outcom
es (e.g.\, credit losses) under a variety of scenarios that she designs. S
he can then take remedial actions (e.g.\, mandate reductions in risk expos
ures). The principal’s program has two parts. For a given set of scena
rios\, we show how to apply a Kalman filter to solve the learning problem.
The optimal design is then a function of what she wants to learn and how
she intends to intervene if she uncovers excessive exposures. The choice o
f optimal scenarios depend on the principal’s priors about risk exposure
s\, the cost of ex-post interventions\, and the potential correlation of e
xposures across and within agents.\n
LOCATION:Zoom
STATUS:CONFIRMED
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